Aviation oil provider raises oil price, airlines feel pressure

Tag : aviation kerosene

China's major jet oil provider, the State-owned China NationalAviation Fuel Group Corporation (CNAF), announced on Tuesday thatit has raised aviation oil price by 720 yuan ($103) per tonneretroactive to July 1.
This will bring the domestic aviation kerosene price to more than7,000 yuan per tonne.
The rise came after China's economic planner, the NationalDevelopment and Reform Commission, raised jet fuel prices by 1,500yuan per tonne as of June 20.
Chinese jet oil providers have long complained about shrinkingprofits caused by rocketing oil prices in the international marketand a relatively low domestic price controlled by the government,which means they cannot pass on those increased costs to buyers.
An industry analyst, who declined to be named, told Xinhua that themove aimed to close the gap between State-set domestic caps andsoaring oil prices.
The rising aviation oil price has placed great operational pressureon the airlines. Ma Xiaoli, a CITIC Securities Co researcher saidexpenditure on aviation oil contribute a major part of theairlines' cost.
Ma predicted that the earnings per share (EPS) of the country'sleading airline company AirChina would decline 25.2 percent to 0.23yuan, while China Southern Airlines' EPS would fall 45 percent to0.40 yuan, as a result of the fuel price rise on June 20.
Domestic airlines' expenditure on aviation oil might climb 30percent if the price continues to stay at a high level. The gapbetween world and domestic prices was still large, said Zhang Xun,an analyst with the CITIC Securities Co.
Liu Shaoyong, chairman of China Southern Airlines, had said earlierthat airline companies were facing tough times because of risingfuel prices.
Liu noted that jet fuel costs account for more than 40 percent ofChina Southern's total cost. The airlines' operation cost increasedby 15 billion yuan in a year because of oil price rises.(ChinaDaily)